India woos US, promises oil and defence equipment purchase to get waiver extension on Iran

New Delhi: Apart from slashing oil imports from Iran, India is also ramping up its oil and gas and defence equipment purchases from the United States in order to get the country to extend the waiver granted to it for limited import of Iranian oil. Iran, which used to be India’s third-largest source of crude oil imports, has slumped to the eighth spot after US-imposed sanctions took effect. India’s crude purchases from Iran was reduced by 60 percent y-o-y in February.

‘Iranian imports replaced with US shale, Saudi crude’

“India used to import about 9.4 per cent of its crude from Iran. We have been gradually replacing that with Saudi crude and even US shale oil. However, price differentials are huge, especially as crude prices are firming up… We will bring down our imports further, but for the time being, we need an extended waiver,” said top officials who have been part of the negotiation process.

In order to make the deal sweeter for the US, India has promised to buy oil and gas worth US$5 billion from the US every year and expedite some US$18 billion worth of defence equipment.

Why does India prefer Iranian crude over others?

For India, Iranian crude makes for the cheapest option and the country needs to keep the imports coming in order to prevent the landed average price of crude from going up. Crude prices have risen from about $54 a barrel in December-end to nearly $70/barrel in April first week. Iran also offers India virtually shipping charge-free crude deliveries and credit over a longer period of time.

The US had given India and seven other countries a waiver in November last year to continue oil imports from Iran for six months. The waiver ends in May.

In order to bypass the US financial system, India has already given Iranian private lender Bank Pasargad to open a branch in Mumbai, which could be used to make payments for oil imports.